Entrepreneurship: Costco- Case Study

This article analyzes the entrepreneurship perspective of Costco, a US-based retail warehouse chain. It covers the inception, merger, expansion plan, accomplishments, and financial results of Costco. Learn about the success of Costco as an entrepreneurship case study.

Entrepreneurship: Costco- Case Study
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Executive Summary
This article will focus on the perspective of entrepreneurship in context of US-based retail
warehouse chain name Costco. This article will highlight inception of Costco, its merged with
Price Club, its different credentials including its financial achievement and subsequent
acknowledgement by different organizations. Costco is a successful entrepreneurship in USA
and it is reckoned as one of the best performer in corporate business of USA.
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Table of Contents
Introduction.................................................................................................................................................4
Inception- Costco.........................................................................................................................................4
Merger- Costco............................................................................................................................................4
Expansion plan- Costco................................................................................................................................5
Accomplishment-Costco..............................................................................................................................6
Present status- Costco.................................................................................................................................6
Financial results- Costco..............................................................................................................................6
Products and services -Costco.....................................................................................................................7
Conclusion...................................................................................................................................................7
Bibliography................................................................................................................................................8
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Introduction
Entrepreneurship is such skill, which enables individual to set up a new business with innovative
power and basic skill of setting up a new business. To set up new business, any individual needs
to concentrate on the basic requirements of business concept, understanding the need of the
business in the form of finance and other factors, and the ability to accomplish set organizational
objective by applying business acumen and leadership quality of the entrepreneur. In this article,
we will critically analyze the case study of Costco, USA to understand the above factors of
entrepreneurship as per the set factors for starting up a new business.
Inception- Costco
The company had started its operation in Morena Boulevard, California on 1976 by Sol Price and
his son, Robert with the name Price Club, a warehouse- based business with the newly launched
concept of retail club of warehouse. Initial financing was amounted to $275,000 contributed by
the friends of Mr. Price.
Merger- Costco
Costco had started its operation in 1983 in Seattle by Mr. James Sinegal and Jeffry H. Brotman.
(Cain, 2019) They used to take care of the business of Price Club. The first opening of retail
outlet was followed by opening of second outlet at Portland in October and third outlet in
Spokane in 1983 December. Both Costco and Price Club have entered into a strategic agreement
for merger of their operations in 1993. It had happened after Sol Price had negated the approach
of Wallmart and Sam Walton to be the second party of merger. The basic concept was to merge
brand Price Club with Costco chain of warehouse stores, Sam’s Club. The business model and
volume of both Price Club and Costco were almost same in respective factors. This criterion
made the merger possible for both the companies. The newly launched company was renamed as
PriceCostco. The membership status of Price Club and Costco was acknowledged as universal,
with the scope of membership of both the companies with the flexibility to exercise their right in
outlets of both the companies. The effect of this merger was observed in the form of
enhancement of turnover to 16 Billion USD from their 206 outlets of PriceCostco. The company
PriceCostco was run by executives from both the companies. However in 1994, The Price
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brothers exited from the PriceCostco and formed a new company named Price Enterprise. This
company had started their operation through chain of warehouse club in Central America and the
in the Caribbean islands without any business connection of Costco. The merger was later on
renamed as Costco Wholesale Corporation in 1997 with rebranding of all Price Club outlets as
Costco. (Wholesale, 2019) (Bryant, 1993)
Expansion plan- Costco
Costco has extended its existence since inception. As on date, the company has global existence
over different courtiers with its 776 warehouses. The company has major presence in USA and
Puerto Rico with 539 outlets. The other significant presence of the company is at Canada with
100 warehouses. Costco has presence in the continents of Asia, Europe and Australia and New
Zealand as business locations.
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Accomplishment-Costco
The company was acknowledged by CNBC on 26th April, 2012 through their documentary
published with name The Costco Craze: Inside the Warehouse Giant. The company was
acknowledged as the third largest retail chain outlets in USA. On that same year, the company
had announced its strategic alliance with Alibaba Group in China to start their online store for
the stakeholders.
Present status- Costco
The Head Quarter of Costco is at Washington, USA. The company faces major competition in
USA in membership warehouse segment by Sam’s Club and BJ’s wholesale. Total human
resources deployed by Costco in their outlets are 245,000 in the status of full and part-time
employment. Total membership strength of the company in 2016 was 86.7 Million, with gradual
increase to 90.3 million in 2017 and 94.3 million in 2018. This company was adjudged as first to
reach 3 billion USD turn-over from zero in six years. The financial position of the company as
on year ended 2018 showed total turnover of $ 97.062 billion with resultant profit amounting to
$ 1.709 billion. The company is ranked as number 15 in the list of Fortune 500 US-based largest
companies considering its total revenue. The American Customer Satisfaction Index (ACSI) had
given the distinction of number one ranking in the segment of retail stores industry. (Costco, n.d)
(SuccessStory, 2018)
Financial results- Costco
Costco had performed in financial achievement with its trend of gradual and steady growth. As
per last financial report of Costco, the company had achieved annual turnover of USD 141.576
billion, which is increased by 9.7% over same period last year. The company had accomplished
earning of USD 3.134 billion in 2018 fiscal year. The stock price of the company was traded
over $ 205 per share and the market capitalization of Costco was evaluated at more than USD
95.7 billion as on October 2018. (Nasdaq, 2019) Given below the year-wise performance chart of
the company considering the different parameters like net revenue, net income, price per share in
USD, number of warehouses and employees since 2005 till 2018: (Costco, Financial Report,
2018)
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Products and services -Costco
The company offers different products in the segment of perishable and non-perishable in nature.
The company has also engaged in providing services to their customers, which are used for
regular living. (Mccamy, 2019)
Conclusion
Costco applied varied level of innovation in their business in the field of choosing products and
services, providing the comfort zone for the customers to ensure its market position through
application of leadership, good governance and working as per set corporate objective to fix their
strategies and implement the same for accomplishment. The merger with Price has proved to be
effective, as from that launch-pad, Costco started its business expansion and found the avenue
for success. The financial report of the company proved that, and different organization
appraising the business performance of the corporate community also acknowledged the same
with due ranking and acknowledgement. Global expansion also proved to be effective, as the
world-wide presence proves successful implementation of business strategies by the company.
Good number of human resources also proves their dedication to substantiate the success of
Costco.
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Bibliography
Bryant, A. (1993, June 17). Costco Set To Merge With Price. New York Times .
Cain, A. (2019, March 6). Here's what Costco looked like when it first opened in 1983. Retrieved
September 2, 2019, from Businessinsider.in: https://www.businessinsider.in/Heres-what-
Costco-looked-like-when-it-first-opened-in-1983/articleshow/68290428.cms
Costco. (2018). Financial Report. Retrieved September 2, 2019, from investor.costco.com:
http://investor.costco.com/financial-information/annual-reports
Costco. (n.d). Timeline. Retrieved September 2, 2019, from costco-business-report-
courtneyt.weebly.com: https://costco-business-report-courtneyt.weebly.com/the-history-of-
costco---a-timeline.html
Mccamy, L. (2019, May 2). 33 items you should buy at Costco - and 14 more you should skip every time.
Retrieved September 2, 2019, from insider.com: https://www.businessinsider.in/33-items-you-
should-buy-at-Costco-160and-14-more-you-should-skip-every-time/articleshow/69147801.cms
Nasdaq. (2019). Costco Company Financials. Retrieved September 2, 2019, from nasdaq.com:
https://www.nasdaq.com/symbol/cost/financials?query=income-statement
SuccessStory. (2018). Costco SuccessStory. Retrieved September 2, 2019, from successstory.com:
https://successstory.com/companies/costco
Wholesale, C. (2019). About Us. Retrieved September 2, 2019, from Costco.com:
https://www.costco.com/about.html
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